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FIN331 (Subject) / Market Determintes of Value, CH5 (Lesson)
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- What is the most difficult and critical part to determine the value of a property? Evaluate the market for the property in order to estimate its future cash flows. Some stories from real estate experience help to make this case.
- What could be possible reasons for Market misjudgements? -Overbuilt-(offices in Manhattan in 1970s, 1980s) -ill designed for the needs of the occupants
- What are market misjudgements in real estate? this are often enduring and disastrous because the commitment is large, permamnent and immobile...
- How can you minimize market errors? *there is rarly sure protection *risk comes with trritory *it is good to avoid real estate markets with a high market risk(where end user is not locked in), one can avoid any investment where there is a prospect of major change in the users or tenants of the property *avoid major change of users in tenants, in case they dont show up
- What does a real estate investor need to know about urban markets? *it is valuable to know recognize the fundamental forces that create these markets which are the same forces that create and shape cities *they need to know the changes *linkages
- Linkages knowing how land use types differ in their locational needs
- what is a economy activity production and change- brings people together
- where did cities occur? *seaports, where land travel and oean travel interfaced *river transits(new orleans) *rivers or trails *rail lines-chicago *coal, iron, oil, gas
- What happened with cities over time? core activities declined, so other activities came up, such as manufacturing(Detroit)-automobiles, manufacturing research and health care.. tourism commerce
- what is the economic base? the economic base is that set of economic activitiesthat a city provides for the world beyond its boundaries(determines growths or decline)
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- what does a economic base drives local economic activity and land use through a multiplier process 1.exports bring money into the city(employment) 2.most is respent on local goods and services(shopping center etc) 3.spend in same city or outside 4.leaks into savings 5.total community income is the sum of export dollars + respent dollar
- Retirement , Tourism , computerand Mutliplier activity retirement people bring their retirement to the sun states(same as tourism) computer... most of the parts re done outside the us, so the money goes somewhere else
- What is the contrast to base activities? Local economic activities
- what are local economic activities? (secondary activities) in a city that serve the local business and households are recirculating the income dervived through base activities (retail centersm givernment and politic land uses, medical offices, business service establishments, restaurants, automotive services...it adds ltlle to the city(base activities) while the opening of a new government office center or new export activity will bring a true increase in export derived dollars